Following the Group’s strategic direction, handsets, solutions and intelligent terminals business has  changed  its  business model  from  serving  the mid-range consumer handset market to catering such high-end differentiated markets as industrial application and Internet of  Things  (“IOT”) terminal markets, and its revenue amounted to HK$516 million. The business sells and ships to and derives its profit mostly from overseas markets and customers, and its operating income comes mainly from differentiated handsets and industrial terminals. As new communications technologies surface and demand for 5G and NB-IOT of IOT increases, market segments including mobile point of sale (POS), intelligent logistics, scan terminals, digital walkie talkies, and internet of vehicles (IOV) terminals are gradually developing. Having ventured into these niche markets early, the Group possesses first-mover advantages. In the second half year, with overseas ODM as development focus, the Group will step up efforts in developing the terminal markets in North America, Europe and Japan, as well as enlarge its market share in Mainland China by expanding its product portfolio and improving service quality.

Benefiting from the rapid growth in market demand for IOT, overall shipment and sales revenue of the Group’s wireless communication modules business, domestic and overseas, soared by more than 205.5% and 97.9% respectively, when compared with the last corresponding period. Tapping growth of the bike sharing market in China in the first half year, the Group’s SIMCOM brand captured the largest portion of the country’s 2G modules market, while internationally SIMCOM claimed a place in the 4G high-end market with products carrying typically higher average unit price, and landed a good number of overseas orders. Despite the notable increase in sales volume of 2G and 4G module products achieved by the Group’s wireless communication modules business, the business’ overall gross profit margin dropped due to the intense competition in the bike sharing market and the low operating margins of the business. However, as many SIMCOM’s 4G high-end modules have obtained certifications from several key operators in the US and Japan and secured strategic partners in many mainland operators, the Group believes the business segment will start to bring profit in the second half year.

During the Period, the Group adjusted the marketing strategy for its IOT automatic vending machines business. Other than configuring its back-end systems to deliver data services to operators, the Group also applied its technological advantage to upgrade operators’ outdated vending machines enhancing their back-end systems, incorporating such online payment functions as WeChat Pay and Alipay to give better experiences to consumers and more potential customer resources to the Group. As for logistics services, the platform provides beverages wholesale distribution and financial leasing services. It represents the Group’s effort to build an integrated service platform that supports automatic vending machine operators and beverage manufacturers. In addition, the Group continued to integrate and optimise its existing cloud computing Big Data service platform to offer integrated IOT application service solutions with expanded coverage from intelligent community, intelligent elderly care services, health monitoring, vehicle  anti-theft management and management systems for property security to students’ safety, automatic vending machine O2O services and industrial Internet. The asset-light operation mode agrees with the Group’s current core technological advantage thus can help ensure stability of the business operation.

As for the intelligent manufacturing business, the Group focused on three main business divisions in the past year, including using automatic facilities such as robots to replace manual labour on the production line, using machines for optical purposes and Artificial Intelligence technology to simplify complex production as main optical product to replace operations in the production line that requires large amount of procedures, and developing industrial Internet intelligence system such as backstage software to replace simple computer operations. After years of effort, the business team is able to reap the benefits from research and development (R&D), production, sales and after-sales integration, and work closely with key accounts to establish a good foundation for the Group to pursue future business development. Although the three business areas are still in the stage of development and R&D investment, the Group is optimistic on the business and believes that it will contribute to the Group's profitability in near further.

Looking ahead, the Group will continue to push forward with the strategic direction of “shifting from the manufacturing industry to the information technology services industry, and from a product-oriented manufacturer to a service-oriented”. For the handsets, solutions and intelligent terminals business, the Group will continue to strive for more support from its high-end differentiated customers and increase investment in industrial IOT terminal and actively expanding domestic and overseas markets from Japan, the US, Europe, India and Southeast Asian to the Middle East and South America. The Group expects handsets, solutions and intelligent terminals business to grow steadily in the second half of 2017. To maintain the leadership of its wireless communication modules business, the Group will aim for technical breakthroughs, exert in R&D of new high-end applications for 4G products, as well as develop more new technologies and new high-end products to meet the IOT demands.

Moreover, the Group will continue to strengthen development of IOT business by investing resources  into expanding its automatic vending machine value-added business, and will continue to expand the cloud computing and Big Data service platform in the domestic and overseas markets to support its proprietary intelligent elderly care service system, health monitoring system and vehicle anti-theft management system. As more and more manufacturers in China are embracing the use of robots, the Group expects intelligent manufacturing business to become its new key growth driver. The Group will continue to develop the three main divisions in the segment, namely robotic integrated applications, optical system and Artificial Intelligence, and industrial Internet, so as to grasp  the bountiful opportunities in the intelligent manufacturing market.

Mr. Wong Cho Tung, Executive Director of SIM Technology, concluded, “Albeit the difficult business environment, the Group believes that intelligent manufacturing technology development will give its business solid growth momentum in the future. The Group will continue to actively invest in resources, strengthening technological R&D, and securing markets, domestic and foreign. We believe that growth of our new business in the coming years will take our business overall to new heights.”